Inflation Warning For 2024: Red Sea Disruptions Causing Freight Rate Spikes And Higher Costs
Portfolio Pulse from Neil Dennis
Disruptions in the Red Sea due to attacks by Yemeni Houthi rebels are causing freight rate spikes and potential inflationary pressures. The Red Sea/Suez Canal corridor, accounting for 12% of global trade, is being avoided by freight companies, leading to longer shipping routes and higher costs. Maersk (OTCPK: AMKBY) has imposed a surcharge, and oil prices have risen, with BP (NYSE:BP) suspending oil shipments through the region. The United States Oil Fund (NYSE:USO) ETF tracking light-sweet crude oil prices has seen an increase. Delays and higher freight rates may affect product availability and prices, with Europe likely to feel the impact more than the U.S.
December 22, 2023 | 6:41 pm
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Maersk has confirmed a surcharge of $700 on a standard 20-foot container due to the Red Sea disruptions, which may lead to increased costs and potentially higher revenues.
Maersk's direct imposition of a surcharge in response to the Red Sea disruptions suggests an increase in revenue from higher freight rates, which could positively impact the stock price in the short term.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
BP has suspended oil shipments through the Red Sea, contributing to a 4.6% rise in Brent crude prices, which could affect BP's costs and oil sales.
BP's suspension of oil shipments through the Red Sea and the subsequent rise in oil prices could lead to increased revenue from higher oil prices, potentially benefiting BP's stock in the short term.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
The United States Oil Fund (USO) has seen a price increase of 0.9% on the day and 2.8% over the week due to the Red Sea disruptions affecting oil prices.
As USO tracks the price of light-sweet crude oil, the increase in oil prices due to the Red Sea disruptions is likely to have a positive impact on USO's price in the short term.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90